ETH jumps 11% as Ethereum miners continue accumulating despite EIP-1559 activation

• Ethereum miners are holding almost $70 billion worth of ETH despite EIP-1559 activation.
• The upgrade’s disinflationary effects on ETH/USD price are the reason behind this massive accumulation.
• ETH/USD broke out of Descending Channel setup to log 11% rally.
• ETH/BTC in accumulation mode, could breakout soon.

JAIPUR (CoinChapter.com) – The ETH/USD pair rallied in tandem with the cryptocurrency market. Ethereum miners were found to hold record units of the second-largest cryptocurrency.

The London Hard Fork didn’t discourage miners from increasing their ETH holdings by 2 million (~$6.6 billion). Miners continued accumulating Ether anticipating EIP-1559’s disinflationary effects to boost ETH price. Net ETH holdings of miners went north of 22.3 million ETH (worth nearly $70 billion), the latest data from Kraken shows.

Related: More Ethereum (ETH) moves out of crypto exchanges as London hard fork approaches

Bullish Miners

The London Hard Fork’s EIP-1559 upgrade eliminated transaction fee volatility in Ethereum. It replaced the blind auction-style fee market with a fixed base fee and priority fee model. The base fee pays for the transaction to be included in the block. The priority fee is the tip that miners earn for processing transactions.

EIP-1559 introduced algorithmic determination of the base fee and its subsequent burning upon successful completion of the transaction. As a result, Ethereum largely became a deflationary monetary system. With more than $2 billion worth of ETH issued since the London Hard Fork and around $1.1 billion worth of ETH burned (as base fees), Ethereum registered a near 54% reduction in supply inflation.

Related: Almost 20K Ether burned since London hard fork; ETH has rallied over 17%

The community at large assumed that this would discourage block producers, but the opposite happened.

“ETH’s hash rate reached a new all-time high of roughly 695 TH/s on September 21st – a day after the latest market-wide correction.”

read an excerpt from Kraken Intelligence’s Crypto On-chain Digest End of Summer Sale September 2021 Report

“…the rise in hash rate since falling toa 3-month low of 455.4 Th/s in late June shows that demand from ETH miners continues to grow despite recent market conditions and the EIP-1559 upgrade.”

EIP-1559 led Ethereum miners to perceive the second-largest cryptocurrency by market cap as a potential store of value. Also, the update didn’t affect the ETH holdings that miners currently hold in their wallets.

“… the adoption of EIP-1559 has not yet affected the ETH accumulation amongst indiviual miners. On the contrary, the amount of ETH held by individual miners is at its highest level to date.”

ETH/USD Technical Setup

In the ongoing rally, the ETH/USD pair broke out of the Descending Channel setup, limiting upside moves for most of September. Bulls pulled Ether out of its bearish rut amid a market-wide recovery that started on Friday. After leading the ETH/USD pair to the local high at $3,322, buyers have their targets set on the $3,515 resistance.

However, due to the explosive bullish pressure, ETH waltzed into the overbought territory. Relative strength index (RSI) read 71.2. Against Bitcoin, ETH remains in the oversold territory and is currently undergoing an accumulation phase. An upside breakout would lead to traders swapping the top cryptocurrency for the second one, which caused Ether to rally against BTC in August.

“Talking of luscious charts, the ETH/BTC cross has seen a lovely consolidation and should move to near double from here if and when the wedge breaks.”

noted global macro investor Raoul Pal

Bulls are in control, and the extent of this rally remains to be seen. Profit takers could hinder the bullish sentiment, but strong support at $2,759 means the bearish interference will be short-lived.